This months OC Metro has a cover story talking about how “homebuilders are working hard to bring buyers in the door.“
Some blame for the rapid appreciation is placed on speculators but I didn’t notice anything mentioning the suicide loans.
” All the speculation had a variety of disruptive effects on the market, he says, including an “artificial demand” that fuels price increases, as well as “a less-engaged community.
“Neighborhoods get homes that sit empty until buyers can resell,” he says. “And that’s not good for (buyers) who are striving for a great place to live.” “
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There are some quotes from a few of the builders, Taylor Woodrow, Centex, Standard Pacific, and Brookfield Homes, that are worth reading.
” Forsum, whose firm offers homes ranging from the $200,000s in Corona and $600,000s in Buena Park to the multi-millions in Newport Coast, said that foot traffic at the company’s developments “has not really been the problem. It’s really a lack of urgency on the part of prospects – how to get them to buy.” So the firm has been offering some “targeted incentives” that range from mortgage help to design upgrades to a reduction in lot and view premiums – but not, he stresses “wholesale discounts.”
Those don’t appear necessary, “because things have picked up, and we’re very encouraged. There’s a market out there for sure, a demand by customers, and we’re in a position to give it to them. We can sell a clear and present value proposition.” “
It seems like the builders don’t think they’ll have to lower prices any more. I’ve definitely noticed that foot traffic has increased since 2007 started (due to the price cuts). The quote above makes it sound like there are a lot of people looking but not necessarily buying. But then it says that things have picked up. So… what is the dealio?
The dealio is that sane lending standards are going to stop many of these people from falling onto their sword.
The rest will be the ones who post real estate horror stories to the 2025 version of what we call a “blog” today.
🙂
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“It seems like the builders don’t think they’ll have to lower prices any more. I’ve definitely noticed that foot traffic has increased since 2007 started (due to the price cuts). The quote above makes it sound like there are a lot of people looking but not necessarily buying. But then it says that things have picked up. So… what is the dealio?”
I attended the Orange County BIA Outlook Breakfast Thursday. The builders are trying to put on a happy face, and they all hope (key word, hope) that things will turn around in 2007; however, their actions do not show any confidence in a rebound. They are not hiring; in fact, the employees of these builders are worried about more layoffs, and the assembled company presidents did not offer any comforting words. They are not buying more property; in fact, they are still actively disposing of property assets when and where they can. They are squeezing their sub-contractors. If they were going to expand, they would be cultivating these relationships, not hurting them.
Basically, the builders are not taking any actions to gear up for a rebound, and if sales do not pick up, more price reductions will happen.
I work in the OC homebuilding industry, and the future isn’t looking rosy. Projects are getting squashed and subs are feeling the pinch. Any happy talk by the builders is just that, happy talk.
Welcome mat my eye! More like a trap door!
The confusing thing is if you look at the new home sales data the prices actually show an overall increase, but the prices of existing homes are getting hammered. If you look at Lansner’s blog you’ll see what I mean. If you subtract out the new home sales from total home sales the market shows much more of a drop. It is NOT treading water. It’s dropping.
You need to remember the difference between a two month pick up and a five year decline. Builder, realtors, and mortgage people jumo at any positive information. I bet you will see the same comment next February.
I have visited Portola Springs and there has been a lot of foot traffic the two separate days I visited. I just can’t see the builders getting the asking prices with such high Mello-Roos and HOA fees. I calculated a $628K model fees and taxes to be roughly 12K a year – ouch! I still see some price correction to come!
I wonder what kind of “mortgage help” the builders are giving since lending requirments has tightened?
Ray,
I’ve seen the builders kick in some money for interest rate buy-downs. For awhile Shea had a buy down of 3 percentage points for the first year of the loan, 2 points for the second and 1 year for the third. Some “help;” it sounds more like a “boiling frog” situation to me. If they’d offer me a 3 point buy-down on a fixed product for 15 years, I might consider it.